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Zodiac Energy Ltd Management Discussions.

The discussion hereunder covers Companys performance and its business outlook for the
future. This outlook is based on assessment of the current business environment and
Government policies. The change in future economic and other developments are likely to
cause variation in this outlook.

Economic Outlook:

Global Economy:

The cyclical upswing in global economic activity, which began since the last quarter of
2016 continued until the middle of 2018. However, the momentum in global GDP began to wane
thereafter, amid broad-based moderation in activity, spanning developed and emerging
economies. According to the International Monetary Fund (IMF), the global economy expanded
by 3.6% in 2018. The growth rate was impacted by multiple headwinds, including weaker
sentiments in financial markets, escalating trade tensions between the US and China,
macroeconomic issues in Argentina and Turkey and volatility in crude prices. The US
economy expanded on the back of strong external demand, private investment, neutral
unemployment and minimal inflation. The GDP of the US economy grew by 2.9%, a rise of 70
basis points vis--vis 2.2% growth registered in 2018. A strengthening US Dollar, neutral
unemployment and minimal inflation were the primary growth catalysts. Euro zone registered
a 1.8% GDP growth during the year, down from 2.4% in 2017, largely due to sluggish demand
in the domestic market. Chinas economic engine is gradually losing its steam; at 6.6%,
the countrys economic growth was lower than the 6.9% level recorded in 2018 .

Outlook:

Buffeted by multiple downside risks, the global economy is projected to expand by 3.5%
in 2019. The International Monetary Fund (IMF) has revised downwards global growth
estimates, following tariff uncertainties between the US and China, as well as weaker
momentum seen in Europe during the second half of 2018. Additionally, major economies such
as Germany and Japan may also be indirectly impacted by trade tensions. Notwithstanding
challenges, emerging and developing economies excluding China will continue to steer the
worlds growth engine. Although Central Banks across the world have largely adopted an
accommodative stance, the investment cycle may remain constrained for the medium term.

Indian Economy:

Although India remained in the esteemed club of the worlds fastest growing major
economies in FY2018-19, domestic economic activities remained sluggish in the second half
of the year. Unfortunately, when the economy began to gain momentum from the impacts of
demonetisation and Goods and Services Tax (GST) related transition, liquidity crisis cast
its shadow on consumption demand and market sentiments. The result was that economic
growth rate was marginally impacted. As economic activities decelerated towards the end of
2018 due to a slowdown in both public and private consumption, expectations for the real
GDP growth were sequentially revised downwards. Consumer confidence gradually improved,
inching up for two straight quarters ending 31 December, 2018 and31 March, 2019. Inflation
as measured by the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) remained
in low single digits for most part of the year. Consequently, the Reserve Bank of India
(RBI) reverted to neutral stance from calibrated tightening (briefly adopted
between October and December2018). The apex bank announced a 25 basis points cut in repo
rate in its last policy of the financial year to accelerate economic growth and usher in
enhanced liquidity in the ecosystem. The Government of India (GOI) adopted prudent
policies to restrict fiscal deficit in a narrow band during the year.

Outlook:

Even as global factors will continue to impact the economic landscape, domestic factors
such as economic growth, consumption patterns, policy stimulus, inflation and government
revenue flow are expected to play an important role in projecting the countrys growth
trajectory. While paying attention to the requirements of rural areas and agriculture,
appropriate measures were announced for reinforcement of important sectors such as
infrastructure, healthcare and investments. Although the RBI is focusing on injecting
additional liquidity into the ecosystem, the availability of capital from PSU banks for
private investment will remain a challenge. The NPA overhang is expected to continue at
least in the near term and the NBFC liquidity position is an issue and will constrain the
availability of funds for infrastructure projects. The fiscal position of the economy is
likely to limit the spending on infrastructure. The Union and state governments will need
to undertake in-depth study of the industrys capabilities, ensure smooth implementation
of policy changes, enable financing and expedite structural reforms to inject life into
infrastructure projects.

Industry Review:

In a rapidly developing economy like India, power remains a crucial facilitator for
economic growth and social wellbeing. The demand for power continues to grow as a large
proportion of the population aspires for a better quality of life. Interestingly, the
countrys power sector is one of the most diversified in the world. Power is generated
from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear
power; and from renewable sources such as wind, solar, agricultural and domestic waste.
Coal continues to remain the backbone of the power sector and the economy in general, but
there is growing focus on green energy. Exponential growth in power demand, coupled with
improved access to electricity is catalysing the countrys per capita power consumption.
It is expected that per capita electricity consumption will increase at 5% CAGR
betweenFY19 and FY23, from 1,149 units in FY18 to 1,450-1,470 units by FY23. This is due
to improvement in electricity access in terms of quality and reliability on account of
intensive rural electrification and reduction in cost of power supply, resulting in
realization of latent demand from the residential segment. Robust GDP growth is expected
at an average of 7.5% to7.7% from FY19 to FY23. To facilitate this growth, energy
requirement is expected to rise at a CAGR of 6.5% to 6.8%during this period.

Climate change is one of the biggest challenges of the 21st century and
India is committed towards the global climate change initiative; and has ratified the
Paris Agreement on Climate Change. As part of the Nationally Determined Contributions
(NDC), the country is committed to reduce the emissions intensity of its GDP by 33-35% by
2030 from the 2005 level. The countrys renewable energy sector has been at the forefront
of growth in capacity development. To provide clean and affordable energy to all, the
Government of India has set an ambitious target of 175 GW energy from RE sources by 2022.
The target is further enhanced to 227 GW. This drive for cleaner energy supply is set
against a framework of sweeping economic and demographic change. The countrys population
is growing fast and by 2025 is likely to overtake China with more people than ever living
in urban areas. The convergence of rapid urbanisation and one of the worlds fastest
economic growth is likely to quadruple Indias electricity demand by 2050.

According to CEA, the total installed generation capacity in India as on March 31, 2019
was 356 GW, of which approximately 113 GW of capacity was added in the past five years
(FY14 to FY19), with most of this capacity addition coming from new renewable plants.
Coal-based installed power generation capacity has maintained its dominant position over
the years and accounted for approximately56% of capacity.

Developments:

Renewable energy installations have more than tripled to approximately 78.32 GW
capacity as on March 31, 2019, compared with 25 GW as on March 31, 2012, constituting
approximately 22% of total current generation capacity. Following the declaration of large
hydro as renewable energy source by the Government of India (GOI) on March19 renewable
energy (including Large Hydro i.e> 25 MW) constitutes 34.7 % of total current
generation capacity Investments in the Indian power sector is expected to continue to grow
over the next few years, but with a shift away from conventional power generation towards
renewable power generation.

Opportunity and Threats:

Opportunity

Threats

o Demand for electricity is expected to increase at a CAGR of 7 per cent to 1,894.7
TWh over the next few years.

o Change in Policy and Regulations

o New entrants in the market and intense competition by existing players

o Current production levels are not enough to meet demand; annual demand outstrips
supply by about 7.5 per cent.

o Technology may become obsolete due to Innovation in Technology

o Various reforms being undertaken by the government are positively impacting Indias
power sector. In wake of the surging domestic coal production, the countrys power sector
is becoming increasingly stable.

o Liberalized the reformed policy on renewable energy and FDI Policy.

Outlook:

Indias energy landscape is rapidly evolving to support an expanding economy,
accelerate access of electricity to rural areas, fuel the evolution in mobility including
EVs and develop the infrastructure required to meet the demands of one of the worlds most
populated countries. In the last few years, India has evolved from lingering power
shortages into a near energy-surplus scenario.

Indias energy consumption is expected to grow the fastest among all major economies by
2040. This paradigm change will increasingly influence the development narrative,
unfolding across the economy. The Government of India is committed to increased use of
clean energy sources and is already undertaking various large-scale sustainable power
projects and promoting green energy heavily. In addition, renewable energy has the
potential to create many employment opportunities at all levels, especially in rural
areas. The Ministry of New and Renewable Energy (MNRE) has set an ambitious target to set
up renewable energy capacities to the tune of 175 GW by 2022 of which about 100 GW is
planned for solar, 60 for wind and other for hydro, bio among other. As of June 2018,
Government of India is aiming to achieve 225 GW of renewable energy capacity by 2022, much
ahead of its target of 175 GW as per the Paris Agreement. Indias renewable energy sector
is expected to attract investments of up to US$ 80 billion in the next four years. It is
expected that by the year 2040, around 49 per cent of the total electricity will be
generated by the renewable energy, as more efficient batteries will be used to store
electricity which will further cut the solar energy cost by 66 per cent as compared to the
current cost. Use of renewables in place of coal will save India Rs 54,000 crore (US$ 8.43
billion) annually.

Achievements in the sector

Solar capacity has increased by eight times between FY14-18. India added record 11,788
MW of renewable energy capacity in 2017-18. A total of 47 solar parks with generation
capacity of 26,694 MW have been approved in India up to November 2018, out of capacity of
4,195 MW has been commissioned. Inter-state distribution of wind power was started in
August 2018. Power generation from renewable energy sources (excluding large hydro) in
India reached record 101.84 billion units in FY18 and has reached 107.22 billion units
between April 2018-January 2019.

Risk and Concerns:

Operating in a dynamic operating scenario, the Company is exposed to various business
risks, which may be internal and external. It has put in place a comprehensive
risk-management system, tailored to the specific requirements of the business, considering
various factors such as size and nature of inherent risks and the Companys regulatory
environment. The risk management system recognises and analyses risks early and takes
appropriate action. The Companys senior management regularly reviews the risk management
processes for regular effective risk management and mitigation.

Internal Financial Control Systems and their adequacy:

Internal Control system and adequacy Internal Control measures and systems are
established to ensure the correctness of the transactions and safe guarding of the assets.
Thus, internal control is an integral component of risk management. The Internal control
checks and internal audit programmers adopted by our Company plays an important role in
the risk management feedback loop, in which the information generated in the internal
control process is reported back to the Board and Management. The internal control systems
are modified continuously to meet the dynamic change. Further the Audit Committee of the
Board of Directors reviews the internal audit reports and the adequacy and effectiveness
of internal controls.

Financial Performance and Review of Operations

Financial Highlights:

(Amount in Lakhs)

Particulars

F.Y. 2018-19

F.Y. 2017-18

Revenue from Operations

6328.00

3838.97

Other Income

14.25

7.26

Total Income

6342.25

3846.23

Less: Total Expenses before Depreciation, Finance Cost and Tax

5850.87

3531.49

Profit before Depreciation, Finance Cost and Tax

491.38

314.74

Less: Depreciation

11.28

13.01

Less: Finance Cost

27.86

26.80

Profit Before Tax

452.24

274.93

Less: Current Tax

140.85

78.45

Less: Deferred tax Liability

(2.82)

(6.10)

Less: Pervious year tax adjustment

4.10

2.99

Profit after Tax

310.12

199.60

Details of significant changes (i.e. change of 25% or more as compared to the
immediately previous financial year) in key financial ratios, along with detailed
explanations therefor:

Ratios

2018-19

2017-18

Difference

Change in %

Remarks

Debtors Turnover Ratio

4.49

4.97

-0.48

-9.5%

Due to increase in trade receivables

Inventory Turnover

11.09

11.98

-0.89

-7.44%

Due to increase in inventory

Interest Coverage Ratio

66.49

19.24

47.25

245.55%

Due to increase in operating profitability of the Company.

Current Asset Ratio

3.53

6.66

-3.13

-46.97%

Due to increase in current Assets

Debt Equity Ratio

0.20

0.04

0.16

350.20%

Due to increase in short term borrowing

Operating Profit Margin (%)

7.43 %

7.89 %

-0.46

-5.82%

In absolute amount terms our operating margins have increased however due to increases
in material cost

Profit is Reduced. Due to increase in net profit as compared to previous year.

Human Resources

The Company believes in establishing and building a strong performance and competency
driven culture amongst its employees with greater sense of accountability and
responsibility. The Company has taken various steps for strengthening organizational
competency through the involvement and development of employees as well as installing
effective systems for improving their productivity and accountability at functional
levels. The Company acknowledges that its principal asset is its employees. Ongoing
in-house and external training is provided to the employees at all levels to update their
knowledge and upgrade their skills and abilities. As on March 31, 2019, the Company had
total 45 full time employees. The industrial relations have remained harmonious throughout
the year.

Cautionary Note

Statements in this Report, describing the Companys objectives, projections, estimates
and expectations may constitute forward looking statements within the meaning of
applicable laws and regulations. Forward looking statements are based on certain
assumptions and expectations of future events. These statements are subject to certain
risks and uncertainties. The Company cannot guarantee that these assumptions and
expectations are accurate or will be realized. The actual results may be different from
those expressed or implied since the Companys operations are affected by many external
and internal factors, which are beyond the control of the management. Hence the Company
assumes no responsibility in respect of forward-looking statements that may be amended or
modified in future on the basis of subsequent developments, information or events.

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